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| Best Practices: Philanthropy |
Controlling Interest
Melissa Phipps
09/01/2005
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If a respected alumnus suggests a new way of gifting to Choate Rosemary Hall,
Dan Courcey, executive director of development, listens. Choate is the
prestigious Wallingford, Conn., boarding school that boasts a list of alumni
including John F. Kennedy, Paul Mellon and Jamie Lee Curtis. Its $198 million
endowment is substantial for a prep school, requiring administrators to stay
fiscally nimble and open-minded. So when a hedge fund manager who was a Choate
alumnus suggested that Courcey consider a Donor Managed Investment (DMI) Account
program, he took note.
 DMI Accounts enable donors to actively manage
contributions for up to 10 years after they have been gifted to a charitable
organization. Donors receive an upfront federal income and gift tax deduction
for up to 50 percent of their adjusted gross income, as well as the ability to
continue to invest the assets (independently or through a financial manager) in
an array of vehicles including hedge funds, private equity and real estate. The
charity “owns” the accounts, so they can be managed tax-free and potentially
result in a much larger gift. A DMI Account also offers a nonprofit a tactic for
maintaining a direct relationship with a favorite donor. “We are not a
billion-dollar research university; we have somewhat limited resources,” Courcey
says. “Many of our alumni are people who take risks with money in everyday life,
who have had tremendous results with their investments, and they think they can
do a lot better investing this money than we can.”
Indeed, the nonprofits
considering DMI Account programs are hoping they will encourage gifts among
philanthropists in search of investment accountability. “Many donors feel that a
university’s endowment may not be managing funds with the same objectives that
they would have,” says Jack Murphy, senior trust officer and director of planned
giving at Cornell University in Ithaca, N.Y. “We could perhaps gain a large
account through this plan that we might not gain otherwise.” Cornell received
approval from its development steering committee early this year to begin
offering the DMI Account program to interested donors. The school has not yet
begun to market the account, but has trained its staff to understand it.
To
date, only six nonprofits offer DMI Accounts to donors, including Cornell,
Skidmore College in Sarasota Springs, N.Y., and Woodside Priory School, an
independent prep school in Portola Valley, Calif. Another half-dozen, including
Choate, are in the process of seeking approval from boards of directors. The
most widely publicized donation through a DMI Account was made to Woodside
Priory. As reported in the San Francisco Business Times, David and Susan
Hafleigh created a memorial scholarship at the school in honor of their
daughter, Amanda, a former student. Susan, a former assistant treasurer at
Oracle, will be actively involved in managing the gifted assets.
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